Deterministic Factors of Stock Networks based on Cross-correlation in Financial Market

Cheoljun Eom, Gabjin Oh and Seunghwan Kim

Papers from arXiv.org

Abstract: The stock market has been known to form homogeneous stock groups with a higher correlation among different stocks according to common economic factors that influence individual stocks. We investigate the role of common economic factors in the market in the formation of stock networks, using the arbitrage pricing model reflecting essential properties of common economic factors. We find that the degree of consistency between real and model stock networks increases as additional common economic factors are incorporated into our model. Furthermore, we find that individual stocks with a large number of links to other stocks in a network are more highly correlated with common economic factors than those with a small number of links. This suggests that common economic factors in the stock market can be understood in terms of deterministic factors.

Date: 2007-05
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://arxiv.org/pdf/0705.0076 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0705.0076

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().